South Africa has become an increasingly popular destination for foreigners seeking to invest in real estate. As a non-resident, it’s essential to understand the tax and legal implications before proceeding.
Before examining tax implications, you must understand whether you’re considered a resident or non-resident for tax purposes. South African tax residency is primarily determined by the “physical presence test.” You will be considered a South African tax resident if:
You may also qualify as a resident by being present for more than 183 days in aggregate during the current tax year. Tax residency has significant implications — consult a tax professional for personalised advice.
Non-residents must comply with South Africa’s exchange control regulations. All funds introduced from outside South Africa to acquire fixed property can be repatriated, along with any profit on resale, after deducting applicable Capital Gains Tax. You must retain proof of the introduction of funds from the original purchase.
Property can be owned individually, jointly, or through a company, close corporation, trust, or entity registered outside South Africa. Each structure has different tax implications. Consult a local tax professional or attorney to determine the most suitable structure for your circumstances.
South Africa taxes income from a South African source. As a non-resident earning rental income from South African properties, you must register as a South African taxpayer and declare that income. Tax rates are progressive. Deductible expenses include interest payments, insurance premiums, agent’s commission, and maintenance costs.
Non-residents pay CGT on disposal of immovable property situated in South Africa. CGT is calculated by adding 40% of the capital gain to the individual’s income for that year, then applying the relevant tax rate. After deducting a R40,000 annual exclusion, the maximum effective CGT rates are 18% for individuals, 22.4% for companies, and 36% for trusts.
When a non-resident sells property for R2 million or more, the buyer or conveyancer withholds a portion of the sale price as an advance payment towards the seller’s South African income tax. The withholding rates are:
This amount is credited against the final income tax liability.
Disclaimer: The information in this article is for general informational purposes and does not constitute legal, tax, or financial advice.